SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For Quarter Ended:                                      Commission File Number:
December 31, 1996                                               0 - 19957

                                  Quantech Ltd.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Minnesota                                             41-1709417
      ------------------                                       ------------
(State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                            identification No.)

                             1419 Energy Park Drive
                               St. Paul, MN 55108
-------------------------------------------------------------------------------
  (Address of principal executive offices)     (Zip code)

                                 (612)-647-6370
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
-------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                      YES     X              NO ____

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock as of the latest practicable date:  47,385,759 shares of
Common Stock, par value $.01 per share, outstanding as of February 12, 1997.




<PAGE>


                                      Index

PART I.    FINANCIAL INFORMATION                                        Page No.

     Item 1:     Financial Statements:

                 Balance Sheets as of December 31, 1996 and June 30,  
                 1996                                                         3

                 Statement  of  Operations  for the Three  Months and 
                 Six Months Ended December 31, 1996 and 1995 and from 
                 inception to December 31, 1996                               4

                  Statement of Stockholders' Equity from inception
                  to December 31, 1996                                        6

                  Statement of Cash Flows for the Quarters ended
                  December 31, 1996 and 1995 and from inception to
                  December 31, 1996                                           7

                  Notes to Financial Statements                               8

     Item 2:      Management's Discussion and Analysis or
                      Plan of Operation                                       9


PART II.    OTHER INFORMATION                                                13


<PAGE>
PART I
                                  QUANTECH LTD.
                          (A Development Stage Company)
                                  BALANCE SHEET
<TABLE>
<CAPTION>

                                                                 (Unaudited)       
                                                                 December 31,       June 30,
                                                                     1996             1996
                                                                 ------------    ------------
<S>                                                            <C>              <C> 
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                    $    1,282,866   $  2,942,871
  Other current assets                                                 49,026         41,269
                                                                  ------------   ------------
                                                                    1,331,892      2,984,140
                                                                  ------------   ------------
EQUIPMENT
  Equipment                                                           352,171        268,058
  Leasehold Improvements                                               15,000         15,000
                                                                  ------------   ------------
                                                                      367,171        283,058
   Less:accumulated depreciation                                     (108,251)       (78,657)
                                                                  ------------   ------------
                                                                      258,920        204,401
OTHER ASSETS
  License agreement, at cost, less amortization                     2,208,446      2,320,334
  Organization expenses, at cost, less amortization                       188          4,675
                                                                  ------------   ------------
                                                                    2,208,634      2,325,009
                                                                  ------------   ------------
TOTAL  ASSETS                                                  $    3,799,446   $  5,513,550
                                                                  ============   ============
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)

CURRENT LIABILITIES
  Short term debt                                              $       15,048   $     24,455
  Accounts Payable                                                    149,030        114,934
  Accrued Expenses:
    Spectrum Diagnostics Inc. obligations                              45,151         53,637
    Other                                                              12,964              0
                                                                  ------------   ------------
   Total Current Liabilites                                           234,193        193,026
                                                                  ------------   ------------

LONG-TERM OBLIGATIONS
    Minimum Royalty Commitment                                         75,000         37,500
                                                                  ------------   ------------

STOCKHOLDERS EQUITY (DEFICIT)
  Common stock, $.01 par value; 
  authorized 90,000,000 shares                               
   issued and outstanding 47,365,759 
   shares at December 31, 1996; and 
   46,900,759 at June 30, 1996                                 $      473,658   $    469,008
  Additional paid-in capital                                       15,408,146     15,296,856
  Subscription Receivable                                             (57,500)             0
  Deficit accumulated during the development stage                (12,322,051)   (10,482,840)
                                                                  ------------   ------------
  Total Stockholders Equity                                         3,490,253      5,283,024
                                                                  ------------   ------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                      $    3,799,446   $  5,513,550
                                                                  ============   ============
</TABLE>

<PAGE>



                                  QUANTECH LTD.
                          (A Development Stage Company)
                        STATEMENT OF OPERATIONS-UNAUDITED

<TABLE>
<CAPTION>
                                                                                                                              
                                    Three months   Three months    
                                       Ended          Ended         
                                    December 31,   December 31,   
                                        1996           1995    
                                    ------------   ------------     

<S>                                 <C>            <C>             
Interest Income                     $     26,540   $     11,176
                                    ------------   ------------     
Expenses:
  General & Administrative               367,170        420,074     
  Research and development               700,581        217,557     
  Sales and Marketing                     70,424         -          
  Minimum royalty expense                 18,750         43,750     
  Loses resulting from transactions
   with Spectrum Diagnostics Inc.         -              -           
  Net exchange (gain)                     -              -           
  Financing                                2,029         51,757     
                                    ------------   ------------     
                                       1,158,954        733,138     
                                    ------------   ------------     
Loss before income taxes              (1,132,414)      (721,962)    
Income taxes                              -              -           
                                    ------------   ------------     
Net loss                            $ (1,132,414)  $   (721,962) 
                                    ============   ============     

Loss per common share               $      (0.02)  $      (0.03) 
Weighted average common shares
  outstanding                         47,119,129     28,727,176     
</TABLE>

<PAGE>

                                  QUANTECH LTD.
                          (A Development Stage Company)
                        STATEMENT OF OPERATIONS-UNAUDITED
<TABLE>
<CAPTION>

                                                                     Period From
                                                                   September 30,
                                                                         1991
                                      Six months     Six months        (Date 0f
                                        Ended           Ended       Inception), to
                                     December 31,   December 31,     December 31,
                                         1996           1995             1996
                                     ------------   -------------   --------------

<S>                                  <C>            <C>              <C>          
Interest Income                      $     61,232   $      12,327    $    151,159
                                     ------------   -------------   --------------
Expenses:
  General & Administrative                724,664         648,737       6,866,135
  Research and development              1,063,413         453,291       3,594,532
  Sales and Marketing                      70,424                          70,424
  Minimum royalty expense                  37,500          87,500         925,000
  Loses resulting from transactions
   with Spectrum Diagnostics Inc.         -               -               556,150
  Net exchange (gain)                     -               -               (67,172)
  Financing                                 4,442         102,828         485,546
                                     ------------   -------------   --------------
                                        1,900,443       1,292,356      12,430,615
                                     ------------   -------------   --------------
Loss before income taxes               (1,839,211)     (1,280,029)    (12,279,456)
Income taxes                              -               -                42,595
                                     ------------   -------------   --------------
Net loss                             $ (1,839,211)  $  (1,280,029)  $ (12,322,051)
                                     ============   =============   ==============

Loss per common share                $      (0.04)  $       (0.07)
Weighted average common shares
  outstanding                          47,010,487      18,400,213

</TABLE>

<PAGE>
                                  QUANTECH LTD
                          (A Development Stage Company)
                   STATEMENT OF STOCKHOLDERS' EQUITY-UNAUDITED
    Period From September 30, 1991 (date of Inception), to December 31, 1996
<TABLE>
<CAPTION>

                                                                        Deficit
                                                                      Accumulated
                                                                        During
                                                  Par      Additional     the                    Paid for      Due     Cumulative
                                       Shares    Value      Paid-In   Development  Subscriptions   Not        From     Translation
                                       Issued    Amount     Capital      Stage      Receivable    Issued     Officers  Adjustment
                                    ---------- ----------  ----------  ----------   -----------   --------   --------  ----------- 
<S>                                 <C>        <C>         <C>         <C>            <C>          <C>        <C>       <C>
Balance at Inception
Net Loss                                                               ($3,475,608)
Common stock transactions:
 Common stock issued,
  October 1991                       3,200,000 $3,154,574
 Common stock issued,
  November 1991                        600,000   $611,746  $1,788,254
 Common stock issuance costs                                ($889,849)
 Cumulative translation adjustment                                                                                       $387,754
 Common stock issued,
  September 1992                       700,000   $699,033    $875,967                 ($53,689)
 Common stock issuance costs                                ($312,755)
 Common stock to be issued                                                                        $120,000
 Cumulative translation adjustment                                                                                      ($209,099)
 Elimination of cumulative 
  translation adjustment                                                                                                ($178,655)
Officers advances, net                                                                                       ($27,433)
                                    ---------- ----------  ----------  ----------   -----------   --------   --------  ----------- 
Balance, December 31, 1992           4,500,000 $4,465,353  $1,461,617  ($3,475,608)   ($53,689)   $120,000   ($27,433)        $0

Net loss                                                                 ($996,089)
Common stock transactions:
 Common stock issued,
   January 1993                        160,000     $1,600    $118,400                            ($120,000)
 Common stock issued,
   April 1993                           30,000       $300     $11,700
 Change in common stock par
   value resulting from merger
 Change in common stock par
   value resulting from merger                ($4,420,353) $4,420,353
Repayments                                                                                                     $5,137
                                    ---------- ----------  ----------  ----------   -----------   --------   --------  ----------- 
Balance,June 30, 1993                4,690,000    $46,900  $6,012,070  ($4,471,697)   ($53,689)         $0   ($22,296)        $0

Net loss                                                               ($1,543,888)
240,000 shares of common
 stock to be issued                                                                                $30,000
Repayments                                                                             $53,689                $22,296
                                    ---------- ----------  ----------  ----------   -----------   --------   --------  ----------- 
Balance, June 30, 1994               4,690,000    $46,900  $6,012,070  ($6,015,585)         $0     $30,000         $0          $0

Net loss                                                               ($2,070,292)
Common stock issued, June 1995       2,150,000    $21,500    $276,068                 ($20,000)   ($30,000)
Warrants issued for services                                  $40,200
                                    ---------- ----------  ----------  ----------   -----------   --------   --------  ----------- 
Balance June 30, 1995                6,840,000    $68,400  $6,328,338  ($8,085,877)   ($20,000)         $0         $0          $0
Common stock issued, net of
  issuance costs of $848,877:
     July, 1995                      6,160,000    $61,600  $1,304,450
     August, 1995                      717,600     $7,176    $161,460
     September, 1995                13,807,296   $138,073  $2,370,389
     November, 1995                  1,897,840    $18,978    $425,482
     December, 1995                 11,217,157   $112,172  $1,292,473
     May, 1996                       6,275,000    $62,750  $3,300,422
     June, 1996                          5,058        $51      $3,650
Payments received on
  subscription receivable             (19,192)      ($192)   ($14,808)                 $20,000
Compensation expense recorded
  on stock options                                           $125,000
Net loss                                                               ($2,396,963)
                                    ---------- ----------  ----------  ----------   -----------   --------   --------  ----------- 
Balance, June 30, 1996              46,900,759   $469,008 $15,296,856 ($10,482,840)         $0          $0         $0          $0
Stock offering costs                                         ($12,310)
Common stock issued upon 
 exercise of options and
 warrants
     September 1996                     10,000       $100      $2,400
     October 1996                      170,000     $1,700     $40,800
     November 1996                      15,000       $150      $3,600
     December 1996                     270,000     $2,700     $64,800                 ($57,500)
Compensation expense recorded
  on stock options                                            $12,000
Net loss                                                               ($1,839,211)
                                    ---------- ----------  ----------  ----------   -----------   --------   --------  ----------- 
Balance, December 31, 1996
(Unaudited)                         47,365,759   $473,658 $15,396,146 ($12,322,051)   ($57,500)         $0         $0         $0
                                    ========== ==========  ==========  ==========   ===========   ========   ========  =========== 
</TABLE>

<PAGE>

                                  QUANTECH LTD
                          (A Development Stage Company)
                      STATEMENTS OF CASH FLOWS - UNAUDITED
<TABLE>
<CAPTION>

                                                                                  Period From
                                                                                  September 30,
                                                        Six            Six            1991
                                                        Months         Months        (Date of
                                                        ended          ended      Inception), to
                                                     December 31,   December 31,   December 31,
                                                         1996           1995           1996
                                                     ------------   -------------   --------------
<S>                                                  <C>             <C>             <C>
Cash Flows From Operating Activities
 Net Loss                                            $ (1,839,211)   $ (1,280,029)   $(12,322,051)
 Adjustments to reconcile net loss to
  net cash used in operating activities:
  Elimination of cumulative translation adjustment           --              --          (178,655)
  Depreciation                                             29,594          16,123         154,605
  Amortization                                            116,375         119,463       1,244,654
  Noncash compensation and interest                        12,000         125,000         501,250
  Losses resulting from transactions with
   Spectrum Diagnostics Inc.                                 --              --           556,150
  Write down of investment                                   --              --            67,500
  Change in assets and liabilities, net of
   effects from  purchase of Spectrum
   Diagnostics Inc.:
   (Increase) decrease in prepaid expenses                 (7,757)         16,118          27,411
    Increase (decrease)in accounts payable                 34,096        (594,396)        147,475
    Increase (decrease) in accrued expenses                41,978        (194,830)        407,239
                                                     ------------   -------------   --------------
     Net cash used in operating activities             (1,612,925)     (1,792,551)     (9,394,422)
                                                     ------------   -------------   --------------

Cash Flows From Investing Activities
 Purchase of property and equipment                       (84,113)       (108,408)       (406,554)
 Organization expenses                                       --              --           (97,547)
 Officer advances                                            --              --          (109,462)
 Purchase of investment                                      --              --          (225,000)
 Purchase of license agreement                               --              --        (1,950,000)
 Advances to Spectrum Diagnostics, Inc.                      --              --          (320,297)
 Prepaid securities issuance costs                           --              --           (22,943)
 Purchase of Spectrum Diagnostics, Inc., net                 --              --              --
  of cash and cash equivalents acquired                      --              --        (1,204,500)
                                                     ------------   -------------   --------------
   Net cash used in investing activities                  (84,113)       (108,408)     (4,336,303)
                                                     ------------   -------------   --------------

Cash Flows From Financing Activities
 Net proceeds from the sale of common stock          $     53,750    $  3,312,952    $ 12,661,986
 Proceeds on debt obligations                                --              --         2,658,435
 Payments received on stock subscription
  received                                                  5,000            --            10,000
 Stock offering costs                                     (12,310)           --           (12,310)
 Payments on debt obligations                              (9,407)       (342,797)       (507,762)
                                                     ------------   -------------   --------------
  Net cash provided by financing activities                37,033       2,970,155      14,810,349
                                                     ------------   -------------   --------------

Effect of Exchange Rate Changes on Cash                      --              --           203,242
                                                     ------------   -------------   --------------
   Net decrease in cash                                (1,660,005)      1,069,196       1,282,866
Cash
 Beginning                                              2,942,871           4,276            --
                                                     ------------   -------------   --------------
 Ending                                              $  1,282,866    $  1,073,472    $  1,282,866
                                                     ============   =============   ==============
</TABLE>


<PAGE>

 
                                  QUANTECH LTD.
                         ( A Development Stage Company )

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 1. BASIS OF PRESENTATION
In the opinion of the  management  of the Company,  the  accompanying  unaudited
financial  statements  contain  all  adjustments  (consisting  of  only  normal,
recurring adjustments) necessary to present fairly the financial position of the
Company as of December 31, 1996 and the results of operations and its cash flows
for the three month and six month periods ended  December 31, 1996 and 1995. The
results of operations for any interim period are not  necessarily  indicative of
the results for the year. These interim  financial  statements should be read in
conjunction with the Company's annual financial  statements and related notes in
the Company's Annual Report on Form 10-KSB for the year ended June 30, 1996.

Note 2. LICENSE AGREEMENT
The Company has a license agreement for certain patents, proprietary information
and  associated  hardware  related to SPR  technology.  The license calls for an
ongoing royalty of 6 percent on all products  utilizing the SPR technology which
are sold by the Company. In addition, if the Company sublicenses the technology,
the  Company  will pay a royalty of 15 percent of all  revenues  received by the
Company under any sublicense.  If the cumulative payments of these two royalties
fail to reach at least  $1,000,000  by December 31,  1997,  the licensor has the
right  to  deprive  the  Company  of its  exclusive  rights  under  the  license
agreement.  As of  December  31,  1996  the  Company  has paid  $850,000  of the
cumulative  royalty  payments.  The Company has also ratably accrued  additional
minimum  royalty  payments of $75,000 as of December 31, 1996,  because sales or
sublicense  revenues  through  December 31, 1997 may not be adequate to meet the
cumulative  minimum royalty  payments.  The Company intends to accrue the entire
$150,000 by December 31, 1997.




<PAGE>



ITEM 2                     MANAGEMENT'S DISCUSSION AND ANALYSIS
                              OR PLAN OF OPERATION

History

         Quantech Ltd.  ("Quantech"  or the "Company") was formed under the laws
of  Minnesota  for the purpose of  effecting  the change of domicile of Spectrum
Diagnostics  S.p.A  ("SDS")  from Italy to the state of  Minnesota  through  the
merger  with SDS on April 14,  1993.  Quantech  had no  operations  prior to the
merger and is continuing the business of SDS to  commercialize  Surface  Plasmon
Resonance ("SPR") technology licensed from Ares-Serono. SPR, the core technology
of  Quantech's  proposed  medical  diagnostic  system,  enables  the  Company to
integrate the existing diagnostic methodologies of immunoassays,  DNA probes and
chemical  binding into a single,  simple  economical  system in order to provide
rapid,  quantitative,  diagnostic  results.  The Quantech  system  configuration
consists  of a small,  bench top  instrument  and a series of  disposables  each
offering  a  particular  test or  series of tests.  It is  anticipated  that the
Quantech system will have the ability to analyze body fluids (e.g.  whole blood,
urine,  saliva)  without  preparation  or addition of  reagents.  The  Company's
initial  focus is to  develop  its SPR  instrument  for  Critical  Care Units of
hospitals;  initially  for the  emergency  department.  Its first  test will aid
physicians  in  assessing  whether a patient has suffered a heart  attack,  with
additional  disposable tests being introduced after the initial  introduction of
the Quantech system.

         Quantech is a development  stage company which has suffered losses from
operations and will require  additional  financing to commercialize its product.
The Company's product development must be completed,  FDA approval obtained, the
product  introduced  to  the  market  and  ultimately   Quantech  will  need  to
successfully attain profitable operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern.

Results of Operations

         The Company has incurred a net loss of  $12,322,051  from September 30,
1991 (date of inception)  through  December 31, 1996 due to expenses  related to
formation and operation of SDS in Italy,  continuing  costs of raising  capital,
normal expenses of operating over an extended  period of time,  funds applied to
research and development, royalty payments related to the SPR technology, losses
due to  expenses  of  Quantech's  predecessor,  Spectrum  Diagnostics  Inc.  and
interest on borrowed  funds.  In addition,  an investment of $3,356,629 was made
when Quantech purchased the exclusive rights to the SPR technology.

         For the three and six months  ended  December  31, 1996 the Company had
interest  income of $26,540 and $61,232,  respectively,  compared to $11,176 and
$12,327,  respectively,  for the same  periods  in 1995 as a result of a greater
amount of cash on hand obtained from Quantech's fiscal 1996 private placement of
securities.  General and administration expenses decreased from $420,074 for the
three  months  ended  December  31, 1995 to $367,170 for such three months ended
December  31,  1996.  This  decrease  was  primarily a result of  reductions  in
professional and consulting fees exceeding increases in salaries, as a result of
additions of employees, and public relations expenditures.  The Company has also
been able to lower or maintain  other general and  administrative  expenses even
though it has added to its staff. General and administration  expenses increased
from  $648,737 for the six months  ended  December 31, 1995 to $724,664 for such
six months ended December 31, 1996. This increase was in part a result of adding
general and  administration  personnel and other costs  associated with Quantech
continuing to build its infrastructure in anticipation of commercial  production
of its system.  A significant  portion of the increase was also  attributable to
increased  public  relations  expenditures as the Company incurred costs for its
annual  meeting of  shareholders,  including its annual  report,  prospectus for
selling  shareholders and investor packages requested by potential  shareholders
and brokers.  General and administration expenses are anticipated to increase in
the future when the Company  nears market  introduction  of, and begins to sell,
its system.



<PAGE>

         Research and development  costs increased from $217,557 and $453,291 in
the three and six months ended December 31, 1995, respectively,  to $700,581 and
$1,063,413 in the same respective  periods of 1996. These increases are a result
of accelerated  research and development  activity including hiring of employees
and  consultants,  chemistry  supplies  and engaging  firms to perform  contract
development  work,  including  design  engineering on Quantech's  disposable and
instrument.  It is expected  that  research and  development  expenditures  will
continue  to increase in the future as  Quantech  completes  development  of its
system,  begins work on additional disposable tests for its system and maintains
a level of activity to continually improve and advance the Company's  technology
and testing system.

         The  Company,  for the three months  ended  December 31, 1996  incurred
sales and marketing  expenses of $70,424.  There are no comparative  periods for
such sales and marketing  expenditures as the Company  established its marketing
activity in the quarter  ended  December  31, 1996.  Marketing  activity in such
period consisted of market research,  including  conducting client focus groups,
creating  specifications  pertaining to user interface  software and integrating
user requirements into the test disposable and instrument  designs.  The Company
anticipates sales and marketing  expenses to increase  substantially as it nears
product introduction and begins system sales.

         Minimum  royalty  expense  decreased  in the three and six months ended
December  31,  1996 as  compared  to the same  1995  periods  as a result of the
declining minimum royalties owed under Quantech's license with Ares-Serono.

         For the three and six months  ended  December  31, 1996  Quantech had a
loss of $1,132,414  and  $1,839,211,  respectively,  as compared to $721,962 and
$1,280,029,  respectively,  for the same periods ended December 31, 1995.  These
increases were  substantially the result of the rise in research and development
expenses and the  beginning  of sales and  marketing  expenditures  in the three
month period  ended  December  31, 1996  exceeding  decreases in such periods in
minimum royalty and financing expenses and the increase in interest income.

         In the three and six months ended  December  31, 1996,  the Company has
continued to contract for the development and design of its prototype instrument
and  disposable  and their  manufacture;  continued  to develop the  chemistries
necessary to do specific tests and  reevaluated  the  development and quality of
its coated grating  component of its disposable.  Quantech has established final
specifications  and quality  requirements for this coated grating  component and
identified  multiple  sources of  manufacturing  for such component.  Management
anticipates  that the  Company  will be able to submit its system to the FDA for
approval by the summer of 1997 and will  introduce  its product  into the United
States after  receiving such FDA approval.  This timetable will be influenced by
the  Company's  ability  to  complete  prototype  development  of its system and
necessary  testing for  submission of its FDA filing and delays it may encounter
with the FDA in its review of the system.

Liquidity and Capital Resources

         From inception to December 31, 1996, Quantech has raised  approximately
$15.5 million  through a combination of public stock sales,  private stock sales
and debt obligations. Additional funds of at least $15 million will be needed to
significantly  expand sales and marketing  activity,  including  establishing  a
sales force once development of the Company's product is completed, to establish
manufacturing  capabilities,  to fund  inventory and accounts  receivable and to
increase the Company's overall infrastructure (the "Launch Financing"). Although
current  funds are expected to allow the Company to submit its system to the FDA
for approval,  Quantech does not have  sufficient  funds to commence  commercial
production  of its system or begin  sales.  As a result,  if  Quantech  does not
complete its Launch  Financing by May of 1997, it will require funds to maintain
operations  while it waits for FDA approval  and to continue  its final  product
commercialization  and initial  marketing  activity.  Although the Company has a
limited  lending  arrangement  with its bank, it does not  anticipate  receiving
significant  funding from commercial  lenders.  Quantech is currently  reviewing
multiple avenues of future funding including a secondary offering of securities,
private  sale of  equity or debt  with  equity  features  or  arrangements  with
strategic partners.  The Company does not have any firm commitments for any such
financing and there can be no assurance that the Company will obtain  additional
capital when needed or that  additional  capital will not have a dilutive effect
on current shareholders.

<PAGE>

         Quantech incurred capital expenditures of approximately  $84,000 in the
six month period ended  December 31, 1996. The Company  anticipates  significant
capital  expenditures  in calendar 1997 for laboratory and production  equipment
and office expansion as the Company nears product  introduction.  The timing and
amount of such  expenditures  will be governed by the Company's  development and
market  introduction  schedules  which are  subject to change due to a number of
factors including  development  delays,  FDA approval and availability of future
financing. In addition to capital expenditures,  the Company has a final minimum
royalty payment of $150,000 due to Ares-Serono on December 31, 1997.

         The  Company  currently  has  outstanding  47,385,759  shares of Common
Stock.  It also has  options and  warrants  outstanding  to purchase  16,098,603
additional shares.

Issued But Not Yet Adopted Accounting Standard

         In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation",  which establishes
financial   accounting  and  reporting   standards  for   stock-based   employee
compensation  plans.  The Company will be required to adopt Statement No. 123 in
fiscal 1997. The Company does not intend to adopt Statement No. 123 in measuring
expense,  however, it will present the proforma  disclosures and those pro forma
amounts  will  likely be less than the  amounts  shown in future  statements  of
income.

Cautionary Statements

         As provided for under the Private  Securities  Litigation  Act of 1995,
the Company wishes to caution  investors that the following  important  factors,
among others, in some cases have affected,  and in the future could affect,  the
Company's  actual  results  of  operations  and  cause  such  results  to differ
materially  from those  anticipated in  forward-looking  statements made in this
document and elsewhere by or on behalf of the Company:

No History of Operations; Development Stage Company; Going Concern Uncertainty

         To date,  the  Company  does not have a product  ready to be brought to
market and its proposed operations are subject to all of the risks inherent in a
new business enterprise,  including completion of commercial development and FDA
approval of its products within  reasonable time frames and budget  constraints,
lack of marketing  experience and lack of production history.  The likelihood of
the  success  of the  Company  must be  considered  in  light  of the  expenses,
difficulties and delays  frequently  encountered in connection with the start-up
of new businesses,  and specifically those historically encountered by Quantech,
the  development of a new product and the  competitive  environment in which the
Company will operate.  The report of the  independent  auditors on the Company's
financial Statements for the period ended June 30, 1996, includes an explanatory
paragraph  relating to the uncertainty of the Company's ability to continue as a
going  concern.  The Company is a  development  stage company which has suffered
losses from operations,  requires additional financing,  and ultimately needs to
successfully attain profitable operations. These factors raise substantial doubt
about the  Company's  ability to  continue as a going  concern.  There can be no
assurance that the Company will be able to develop a commercially viable product
or marketing system or attain profitable operations.

Future Capital Needs

         The  Company  does not have  sufficient  funds to  commence  commercial
production and sales of its system as provided above in "Management's Discussion
and  Analysis  or Plan of  Operation - Liquidity  and  Capital  Resources".  The
Company's  ability to begin  commercial  production and sales of its system will
depend upon the continued  availability of investment  capital,  funding made by
strategic partner(s) or licensing revenues,  until the revenues from sale of the
instruments  and  associated   test   disposables  are  sufficient  to  maintain
operations.  Additional  funds  may have to be  raised  through  equity  or debt
financing which could dilute current  shareholders.  If funding is not available
when  needed,  the  Company  may be forced to cease  operations  and abandon its
business. In such event, Company shareholders could lose their entire investment

Other Factors

         As described in the  Company's  Form 10-KSB for the year ended June 30,
1996 under  Cautionary  Statements and Prospectus dated September 12, 1996 under
Risk Factors, there are additional factors concerning the Company that should be
considered  including:  uncertainty of market  acceptance of Quantech's  product
once  introduced,  inability or delay in , effects of  government  regulation on
product and its sale,  ability to manufacture  product,  exposure to the risk of
product liability and market for the Company's shares.


<PAGE>


                                     PART II
                                OTHER INFORMATION


Item 1. Legal Proceedings
            Not Applicable

Item 2. Changes in Securities
            Not Applicable

Item 3. Defaults upon Senior Securities
            Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders

        The  Company  held  its  annual   meeting  on  November  25,  1996,   in
        Minneapolis,  Minnesota.  The  Company  solicited  proxies  and  filed a
        definitive  proxy statement with the Securities and Exchange  Commission
        pursuant to Regulation  14A of the  Securities Act of 1934, as amended..
        The  matters  voted  upon at the  meeting  and the  votes  cast  were as
        follows:

No. 1   Election of Mr. Robert Case as class 1 director   Votes for - 28,817,762
        Votes Withheld - 8,100

No. 2   Amendment  to Articles of  Incorporation  to increase  the number of
        authorized shares to 120,000,000 shares consisting of 90,000,000 Common
        Shares and 30,000,000  undesignated shares Votes for - 27,229,611 Votes
        Against - 785,919 Abstain 810,332

Item 5. Other Materially Important Events
            Not Applicable

Item 6. Exhibits and Reports on 8-K
            a. Exhibits - None
            b. Reports on 8-K - None



                                   Signatures

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                      QUANTECH LTD

                                      /s/ R.H. Joseph Shaw
                                      R.H. Joseph Shaw
                                      President and Chief Executive Officer

                                      /s/ Gregory G. Freitag
                                      Gregory G. Freitag
                                      Chief Financial Officer


Date:  February 13, 1997